Location choice and the internationalization sequence

Abstract

PurposeThe purpose of this paper is to contribute to the literature on emerging multinationals by studying the internationalization strategies of two established companies in the Indian pharmaceutical industry: Ranbaxy and Wockhardt.Design/methodology/approachThe study utilizes a longitudinal case‐study approach to capture Ranbaxy's and Wockhardt's dynamic internationalization patterns. An extensive literature review using recently published works, government documents, and organizational reports was employed to give a clearer description of the two case companies.FindingsThe internationalization patterns of Ranbaxy and Wockhardt suggest that the mainstream internationalization models are more effective in explaining exploitative learning in terms of utilizing the firm's existing knowledge stock in the early stages of internationalization, while the emerging internationalization models (e.g. the LLL framework and accelerated internationalization) are more effective in explaining exploratory learning in terms of seeking novel knowledge flows in firms' later stages of internationalization.Research limitations/implicationsThe empirical base is limited and the use of case studies has its shortcomings (e.g. in terms of sample size, generalizations, etc.). As such, the exploratory findings of this study must be further verified and extended at other sites, especially to firms operating in regulated industries in other emerging countries. Second, the author analyzed the decision to enter a foreign market, without studying subsequent performance and its effects on further entries. The accelerated international growth may have negative consequences for the two cases, as time compression diseconomies may emerge when the firm has a fast foreign expansion pace. Further research using data from other industries and countries, and taking into account entry mode and performance could shed more light into this controversial issue. Third, the author only compared an early‐mover and a latecomer in the comparative case analysis. One of critical topics for further study is to compare different three types of MNEs, e.g. latecomer, newcomer and early‐mover, from the same industry to understand how their geography of learning and knowledge acquisition are influenced by their internationalization and locational choices.Practical implicationsOverseas acquisition, as compared to greenfield investment (e.g. wholly owned subsidiaries), offers more benefits to Indian pharmaceutical firms. Overseas acquisition provides access to established marketing networks, augments Indian firms' ownership advantages with new products and other firm‐specific intangible assets and, offers economic gains from improved operational synergies.Originality/valueThe paper is one of the few which has dealt with an important aspect of firm internationalization, i.e. country selection, the sequence of internationalization across foreign markets and their modes of integration.